Broker tips: Carillion, Greene King, SThree

31st Jan 2011 12:54

An update from Carillion has provided Panmure Gordon with additional confidence in its earnings forecasts, after the contracting firm demonstrated positive contract momentum and made a start to the current year that gives cause for optimism.The construction and support services specialist announced over £360m of contract wins across all its divisions in its trading update on Monday. It also said it had signed a Memorandum of Understanding with the UK government to re-engineer procurement and service delivery."While this has no immediate impact on numbers, it should provide the opportunity for further work," said analyst Andy Brown. The group also said that it continues to expect "good profit and earnings growth,"The broker maintains its 'buy' rating, noting that Carillion's valuation remains at a discount to its Support Service sector peers. Target price is 400p.Financial services firm Matrix says that Greene King's trading update released on Monday was "very good" and represents the best performance in the pub groups sector for the recent 'update' season. Although not explicitly disclosed in the statement, the broker calculates that like-for-likes in the group's managed pub estate were about 4.6% higher over the past eight weeks, compared with an increase of 3.7% for the first 30 weeks (reported at its interims), "so clearly the company has seen a nice acceleration in performance," says analyst John Beaumont.The broker also highlights Greene King's acquisition of Cloverleaf - a pub company with 12 very large pubs in the North and the Midlands - which should give it exposure to the growing carvery sector and good new build skills."We can envisage some small upgrade to profit before tax estimates for 2011 and maybe some modest increases for 2012," says Beaumont. A 'buy' is retained while changes are being made to estimates. The target price is under review.After a strong run by the shares, SThree has been was hit with a downgrade by Peel Hunt despite 'in line' results and a positive 2011 outlook.The broker notes that all of the recruitment specialist's markets exited 2010 in growth. Furthermore, management has a confident outlook for the current year, with expected expansion in existing markets as well as continued investment in new geographies.While the full-year results broadly matched Peel's estimates, the broker highlights that the shares have surged 70% since August and have caught up with its target price of 400p."We fundamentally like SThree - it is well positioned for growth, well managed, has a strong cash position and a scalable business model," says analyst Henry Carver. "However, with no change to numbers and following a strong recent run, we are moving our recommendation [from 'buy'] to 'hold'."